Alun Michael: The Government are very grateful for the continuing involvement of the whole range of interested parties in the development of the Company Law Reform Bill. Development of the Bill has proceeded on as consultative a basis as possible throughout, and has relied crucially on the close involvement of a wide range of businesses, business organisations, and other individuals and bodies.
	Publication of the White Paper "Company Law Reform" in March this year was a key stage. The White Paper set out the Government's policy proposals in almost all areas of the Bill, and included draft clauses in many of these areas. Many further clauses were subsequently published on the website, along with further explanatory material, including a Government statement published on 19 July 2005.
	Consultation has revealed continued broad support for the underlying thrust of the Bill, and for the great majority of the specific policies within it. Many comments of detail were received on the draft clauses. The Bill as introduced takes account of these comments and benefits very significantly from the suggestions made.
	The full range of the Government's proposals is now set out in the Company Law Reform Bill, introduced to Parliament on 1 November. This statement sets out the main areas where, in the light of the consultation process or of other recent developments, the Government have made more substantial policy decisions in key areas since July.
	Directors' duties
	There were many detailed and helpful responses on the proposed statutory statement of directors' duties. In the light of those responses, the Government have decided:
	that it is still fully committed to an approach based on "enlightened shareholder value", but wants to ensure that this adequately reflects wider expectations of responsible business behaviour. The duty to promote the success of the company will therefore place greater emphasis on the long-term consequences of business decisions, and on the need for directors to take account of factors such as the interests of employees and the impact of the company's operations on the community and the environment so far as reasonably practicable.
	to make it clearer that the statutory statement is (with two exceptions in respect of the duties on conflicts of interest) a codification of the current law and does not change the current position on authorisation.
	to make it clearer that most of the duties continue to be fiduciary. This is important in respect of the remedies for breach of the duties.
	to make clear that the clauses on directors' liabilities change the law on ratification so that the necessary majority to ratify a wrong has to be reached without the support of the wrongdoers.
	True and fair accounts
	It is a very clear common sense principle that the auditor's role is to ensure that accounts give a true and fair view of the company's financial position. Whilst some of the terminology differs, this is the aim both of our own UK company law traditions and modern International Accounting Standards.
	The current law reflects this basic principle. However, the statutory framework is complicated and has become more so over time, combining both UK and Community law provisions. The Government is therefore taking the opportunity in the Bill to restate s.235 of the Companies Act to express the principle more clearly in the legislation.
	To underline the point, the Bill also includes a new clause providing an express duty on Directors to ensure accounts give a true and fair view. We are requiring that auditors take this new duty of the directors into account when they conduct their audits, to underline the point that directors and auditors should approach the accounts with the same common sense objective of ensuring that accounts give a true and fair view of the company's financial position.
	Resolutions and meetings
	Minimum_notice_period_for_AGMs
	The Government had originally proposed reducing the statutory minimum notice period to 14 days, as a simplificatory measure. But several stakeholders have commented that the original CLR recommendation may have been overtaken by EU developments. The proposed EU Shareholder Rights Directive is currently consulting on introducing a minimum notice period of 21 "business" days for quoted companies AGMs.
	Some stakeholders have also argued that such a change could conflict with the increasingly important "shareholder engagement" agenda. In the light of these concerns, the Government have decided to retain the current law (21 days for AGMs and 14 days for other general meetings), at least pending further clarity at EU level.
	15_day_holding_period
	This White Paper proposal was intended to foster shareholder engagement, by giving shareholders a 15 day "window" where they can act upon the information disclosed in the company's annual accounts and report and lay resolutions for the general meeting. But stakeholders raised significant concerns that it might cause practical difficulties and thus impose additional costs in implementation, particularly in conjunction with our other proposal to shorten the timeline between the financial year-end and holding the AGM to six months.
	The Government are still keen to foster the underlying policy of shareholder engagement. The Bill will therefore ensure that shareholder resolutions requisitioned before the end of the financial year-end should still be circulated at the company's expense.
	Institutional Investor Voting
	The White Paper said that the Government were continuing to explore the proposal that institutional investors should disclose how their voting rights had been exercised, as had been recommended by the Company Law Review. The Government published draft clauses on this on 14 October 2005. The proposal has attracted considerable stakeholder comment with views polarised. Some consultees argue that such a mandatory disclosure regime will be costly for industry and that the benefits are unclear. Others strongly support the measure. The Government believe it is important that institutional investors take an active part in the governance of companies in which they invest and disclosing how they have voted is a helpful measure in this context. The Government would prefer disclosure to become the norm without statutory action but recognises that a voluntary approach may fail to deliver this outcome. Our approach is therefore to encourage disclosure without compulsion in the first instance but we consider that a power should be contained in the Bill against the possibility that sufficient disclosure does not take place on a voluntary basis. If it becomes necessary to exercise the power, the Government will consult fully with interested parties on any mandatory regime which might be considered, paying regard in particular to possible costs and benefits.
	Offences
	The White Paper consulted on changes to the framework of liability attaching to breaches of Companies Act requirements. These proposals attracted a good deal of comment. In particular, consultees were concerned about an apparent extension of liability beyond those officers of the company who are currently held to be liable for breaches. These comments focused on two specific White Paper proposals, namely that the definition of "officers in default" should be redefined and to some extent extended more widely within the company by the use of a new definition of "senior executive"; and the proposed inclusion of a category of persons, "responsible delegates", who would be newly liable in certain circumstances.
	Concerns focused both on the desirability of the underlying policy, which many felt risked diluting the essential focus on the responsibilities of the directors themselves; and on the technical difficulties of defining these new categories of persons in ways which met the overall objective of increasing clarity. The Government share these concerns, and therefore does not now propose to take forward these specific measures.
	The White Paper proposed to increase the maximum penalty for the offence of directors approving defective accounts to seven years imprisonment; and the July consultation proposed the same maximum penalty for the new offence for auditors who knowingly or recklessly issue an incorrect audit report. Stakeholders felt that these proposed penalties were excessive, and the Government have decided to remove the threat of imprisonment for both offences, for which the maximum penalty will therefore be an unlimited fine. Serious offences can still be pursued eg through a prosecution for theft or false accounting, each of which carries a penalty of up to seven years in prison.
	Charges
	On 19 July the Government launched a consultation seeking views on the economic impact of the recommendations of the Law Commission and the Scottish Law Commission in respect of company charges. The timing of this consultation ensured that it would be possible to include a sufficiently wide power in the forthcoming Company Law Reform Bill to enable them to be enacted if there was firm support expressed for the Law Commission's proposals.
	It was clear from the consultation that there is not a consensus of support for the proposals. The Bill will therefore not include a specific power to implement charges measures but the Bill will include a new power to make company law reform orders (as discussed in the White Paper), and this will provide a mechanism for implementing certain changes in respect of company charges, on matters of company law (as against property law) if wished. The Government will continue to consider and to discuss with interested parties exactly what changes should be implemented.
	Paper free holding and transfer of shares
	The White Paper said that the Government will be willing in principle to include provisions in the Bill which would permit companies to stop issuing paper share certificates. Many respondents argued that only a mandatory approach would achieve cost savings and wider business benefits, but they also agreed that it is too early to take a blanket approach and that more information is needed on the costs and benefits of a paper free approach. The Government believe it would be premature to take a decision on the case for a mandatory approach until there has been wider public consultation, but it does not wish to rule out the option for reform. The Bill will therefore extend the existing power relating to transfer of securities (section 207, Companies Act 1989) so that it can be used either to permit or to require the paper free holding and transfer of shares.
	UK-wide law: Northern Ireland
	On 7 September Angela Smith MP launched a consultation on the proposal that the new companies legislation should extent automatically to companies in Northern Ireland (as well as, as now, Great Britain). This proposal reflected the fact that legislation in Northern Ireland, though technically a separate matter, generally follows very closely the precedent of legislation in Great Britain, but with a distance in time which means that Northern Ireland companies do not generally get the advantages of new legislation until some time after their English, Welsh and Scottish counterparts.
	Consultation revealed substantial support for this proposal, and for the suggestion that certain other aspects of law which relate closely to company law (for example, limited partnerships and limited liability partnerships) should be legislated for on a UK-wide basis. The Bill reflects this position.
	Company law will remain a transferred matter, and a future Northern Ireland Assembly could decide to resume responsibility for drafting separate Northern Ireland companies legislation if it considered it desirable.
	Insolvency law
	UKHL 9) there may be an anomaly between liquidation and administration as regards the recovery of insolvency practitioners' expenses, raising concerns about whether or not companies will be advised to follow the most appropriate form of insolvency procedure. The decision is to the effect that for companies in liquidation the payment of the general expenses of the winding up cannot be paid out of assets which are subject to a floating charge ahead of the floating charge holder.
	There may also be implications for both the general body of creditors and employees because floating charge holders may be attracted by the better returns that the more terminal liquidation procedure offers, as opposed to administration, which is more aimed at fostering company "rescue." For these reasons, the Government will change the law to ensure that for companies in liquidation general expenses of the wind-up can be paid out of assets subject to a floating charge ahead of the floating charge holder.
	Enterprise Act
	Part 9 of the Enterprise Act 2002 creates a gateway for the disclosure of information relating to specific consumer and competition matters. In addition, it creates a gateway to allow certain information to be disclosed for certain civil investigations and proceedings overseas. The current Part 9 gateways do not in general allow information to be released by public bodies to business and individuals for the purpose of civil proceedings.
	The Government launched a consultation on this area on 23 August 2005. This consultation does not close until 18 November 2005 and the Government look forward to responses. No decisions will be taken until the Government have had the opportunity to consider all such responses. However, without prejudice to the outcome of that consultation, in the event that the Government were to decide that some relaxation of the gateways was appropriate, it would be necessary to provide some legislative route to implement the specific measure. The Bill will therefore include a power for the Secretary of State to prescribe through secondary legislation circumstances in which such disclosures might be made.

Alistair Darling: In July 2004, I took the decision to withdraw funding for the Leeds Supertram because of excessive cost increases. Since then we have been in discussion with the scheme promoters, West Yorkshire Passenger Transport Executive (WYPTE) about their alternative proposals.
	I have considered very carefully all the new information provided by the promoters. The latest tram proposals are still very expensive—costs are nearly 40 per cent. higher than originally planned. This proposal is also for a reduced scheme which places more of the risks with the public sector. It does not represent the best value for money for the people of Leeds or the best use of public money—particularly when compared to alternative proposals put forward by WYPTE for a top of the range rapid bus scheme. I therefore cannot support requests to re-instate the tram proposal.
	Leeds Supertram was given approval in 2001 with a cap on the public sector funding of £355 million in 2001 present value terms. By July 2004, costs had escalated considerably to over £500 million.
	Since funding was withdrawn, the promoters have made great efforts to reduce the scheme costs. Their submission of November 2004 suggested that the funding requirement for a revised proposal was £392 million, in present value terms. This was for a reduced scheme (the current proposal truncates the southern line) and with some risks taken back into the public sector.
	The promoters say their latest proposal requires public sector funding of £348 million in 2001 present value terms. However, this simple comparison is seriously misleading because:
	These figures are the total value in 2001 of the required public funding, at the prices ruling in 2001. In 2005, at current prices, the value would be £486 million—nearly 40 per cent. above the 2001 cap. And this is still a present value figure, so it understates the cost increase in cash terms over the life of the scheme.
	But it is the cash costs that count. The current proposal requires £261.6 million of grant and a total of £1,142 million in RSG payments, associated with the PFI credits, up to 2040. The original proposal required grant of £294.5 million, and only £467 million in annual payments to 2032. Allowing for local contributions, the cost to Government has almost doubled, from £664 million to £1.3 billion, over 40 years.
	At a meeting with local Council Leaders on 26 July 2005, the Under-Secretary of State asked for additional information on tram costs and for further work to be done on a top of the range bus option. The aim was to consider whether buses could deliver a better solution than light rail when all possible existing levers were used in an imaginative and cost effective way.
	We commissioned Atkins to carry out the study, working closely with WYPTE and its advisers. I am grateful to WYPTE for all the work they have done with the Department on this study.
	Atkins based their work on that previously done by WYPTE to look at a bus rapid transit (BRT) system as an alternative to Leeds Supertram. This work was submitted to us in November 2004. Atkins concluded that the work undertaken by WYPTE was "very thorough, and a good basis for considering a high quality bus alternative in the current study".
	A BRT system is a new approach to meeting public transport needs. It would involve superior quality vehicles with many features similar to trams, including high quality vehicle interior, air conditioning, double glazing etc. It would be accompanied by fixed physical infrastructure in terms of dedicated stops, high quality shelters, real time information, off-board ticket machines etc. And it would be developed to operate as a complete system, with destinctive branding, priority at junctions, lengths of segregated track etc.
	Atkins concluded that:
	"The BRT option has the potential to offer a lower cost and better value for money alternative to the Supertram proposal. Atkins considers that a BRTsystem would offer many of the attributes of the Supertram system, including:
	similar stop and service patterns with a higher frequency service;
	similar overall journey times (including waiting time);
	the majority of the physical features;
	in the region of 90 per cent. of the forecast patronage for Supertram; and
	most of the wider appraisal benefits attributable to Supertram
	and these would be delivered at around 50 per cent. of the capital cost of the tram."
	Atkins recognises that BRT has most of the advantages of the tram scheme, but not all, and there remains an element of risk in their conclusions given that a comprehensive bus system has not been delivered in this manner before in the UK. They also noted that, in a deregulated bus market, there were delivery risks that would need to be addressed.
	The tram proposal remains extremely expensive, and in cash terms still costs much more than the scheme we approved in 2001. I cannot, therefore, approve the Supertram proposals. On the other hand, the bus study suggests that a top of the range bus system, designed and delivered in a way similar to a tram network, has considerable potential, and would be significantly better value for taxpayers. It could benefit more people and would be more flexible with scope for further extensions.
	With the right commitment from central and local government, and the local bus operators, there is an opportunity here for Leeds to develop a showcase bus stytem that could lead the way for other cities.
	I would encourage West Yorkshire PTE to take this opportunity and to work with my Department to develop proposals. The funding will be there for the right proposals.
	We acknowledge Atkins' comments about risks in delivering a BRT system. However none of the problems identified by Atkins is insurmountable. I very much hope that the bus companies in Leeds will work constructively with the PTE to show what a high quality bus system can deliver. There are clear benefits to the bus companies in so doing. However, should it be necessary, I am prepared to work with WYPTE to give them the powers they need to make sure we get a system that works properly as part of an overall transport policy.
	We have always recognised that trams can be very effective in heavily trafficked areas. We will continue to be prepared to support trams, where they are the right solution. But we will not do so at any cost, and in many cases a well designed and promoted bus based system is likely to provide a more cost effective solution.
	Where trams are promoted, they will need to be developed as part of an integrated approach to tackling an area's problems, and they will need to be supported by commitments to complementary measures to deliver the benefits of increased public transport usage and reduced congestion. We will continue to work closely with promoters and the industry to seek to ensure that these benefits can be realised, and that the costs of tram systems are minimised and properly controlled.